Ontario’s Classy “A” electricity customers accept donations from the lowly Class “B” ones

A recent article penned by yours truly, outlined how industrial wind turbines cost Ontario’s ratepayers and taxpayers as much as $2 billion annually while contributing little to ratepayer needs or grid reliability. Those costs, however, are not the only impact on electricity bills in Ontario for residential and small and medium sized commercial businesses who are labeled as “Class B” ratepayers!

Back in 2010 the McGuinty led Ontario Liberal government were hearing about the effects of the GEA via climbing electricity prices as well as issues with TOU (time-of-use) pricing.  The loudest voice came from AMPCO (Association of Major Power Consumers of Ontario) who lobbied for lower prices for their members.  As a result of their lobbying, Brad Duguid, than Minister of Energy and Infrastructure issued a directive to IESO, March 4, 2010 instructing them to create an industrial energy efficiency program.  The program was developed and labeled the ICI (industrial conservation initiative).  The ICI allowed large industrial electricity users to pick five (5) “peak” demand hours and they would be rewarded with lower rates.  Kind of like winning the “Lottery” but much easier.  During those 5 hours they would go off-grid, perhaps by shutting down or simply firing up a gas generator or two to get them through that hour. IESO labeled them “Class A” ratepayers. *

IESO’s design of the ICI has resulted in the claim; due to lower “peak demand” periods, ratepayers have been spared from higher electricity prices.  The claim is made as the sector would reputedly have had to spend big dollars to acquire additional “capacity” to ensure we avoid grid failure due to those 5 “high demand hours”. That being the claim IESO don’t tell us; why we export (19.8 TWh) more TWh (terawatt hours) annually than the AMPCO members use (15 TWh).  IESO also don’t tell us why we are obliged to pay for spilled hydro, curtailed wind and steamed-off nuclear whose costs are added to the Global Adjustment (GA).

What the ICI program accomplishes for AMPCO members is related to the GA, ie; the pot adding dollars on a continuing basis! The GA is the difference between contracted prices and market prices.  As an example; if the contracted price for wind is 13,5 cents a kWh but when it enters the grid the HOEP (Hourly Ontario Electricity Price) or market trading price is only 2 cents/kWh the difference of 11.5 cents is allocated to the GA. The ICI works on the basis of the higher the GA is, the bigger the benefit to ICI members.  As a result, the continuing annual decline in HOEP values has resulted in Class B ratepayers picking up a greater portion of the contracted or regulated price.  In other words; if demand falls and the HOEP price tanks, Class B ratepayers are obliged to pay more not less.

The foregoing was evident during the first three months of the current year compared to the first three months of 2019. Class A ratepayers consumed slightly more year-over-year, and saw their GA allocation increase from $51.94 MWh in 2019 to $59.66 MWh in 2020 for an increase of 14.9%.  Class B ratepayers however, saw their GA rate allocations increase $30.59/MWh or 37.8% from $80.85/MWh to $111.44/MWh.

The net result of the above was an allocation from Class B to Class A in 2019 for the three months of $211.5 million.  For the comparable three months of 2020 the allocation increased to $374.4 million or an additional $162.9 million (+77%) in just one comparative year-over-year quarter.

It is kind of shocking to realize and understand Class B ratepayers actually consumed 1.3 TWh less in the first three months of 2020 than 2019 but are being held responsible for payment of $162.9 million more than they paid in the 2019 quarter to subsidize “Class A” ratepayers!

Maybe the time has come to create another Class of ratepayers to stop the diatribe emanating from IESO whose CEO and President has the nerve to proclaim in their just released annual report that : “our focus has stayed the same: ensuring Ontarians have affordable electricity, where and when they need it.”

We must ask the question:  which Ontarians truly have affordable electricity and why only them?

* The availability to reference an operation/company as Class A was expanded by further directives from the Energy Ministry (Bob Chiarelli) but many of the additional ones are not members of AMPCO.

Author: parkergallantenergyperspectivesblog

Retired international banker.

3 thoughts on “Ontario’s Classy “A” electricity customers accept donations from the lowly Class “B” ones”

  1. The costs being put on the backs of future generations is unforgivable.
    What has been allowed to happened to our energy file should be in under a deep criminal probe.

    One of Fords emergency measures reduced the rates consumers are paying during this plandemic, but those deferred costs to consumers are now incurred debt and must be paid – just not today. Again, future debt load carries the burden.

    The six million dollar man and his board of cronies don’t pull a pay any longer … where are the savings? That’s a lot of money that should be put back into the energy file. Ford made such a big stink about getting rid of him, but not such a big stink about where those savings are going. Hmmm.

    Where is the independent review of energy contracts that was due February 28/2020?

    Opening up our economy should include cancelling the costly and disastrous FITT contracts and all heavily subsidized wind and solar. A broke Sub-Nation needs critical measures to get on top of the bankruptcy curve – it doesn’t need the public purse, rate payers, farmers and business’s financial security and stability continually exploited for unneeded intermittent energy.


    Liked by 1 person

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